Why the Trump Administration’s “Most Favored Nation” (MFN) Executive Order on Medicare Part B and Part D Drugs Is Bad for America

The White House announced a most favored nation executive order 1 on September 13 in an attempt to lower prescription drug costs in the United States. The new policy relies on pegging American prescription drug prices to international prices, promising to provide Americans 2 with the lower prices for available in a collection of other countries.

The president’s executive order effectively ties Medicare Part B and Part D reimbursements for medicines to the prices paid in foreign countries —what the president is calling the most-favored nation price. 

The MFN Model Is Bad for Americans

The problem with the Most Favored Nation model is that almost all the “most-favored” nations feature single-payer healthcare markets that are warped by socialist price controls.

The president’s executive order will make sweeping changes to the drug and biological supply chain in America and will have implications for manufacturers and distributors of lifesaving drugs, as well as for group purchasing organizations, hospitals, and physician clinics, among others.

Implementing the president’s executive order will dampen the financial incentive for researchers to engage in the research and development of new treatments at a time when we need them the most. It should be obvious that importing socialist price controls is inconsistent with producing new medicines in an environment of increasing research and development costs.3 A reduction of $2.6 billion in available R&D funding is estimated to result in one less new drug 4 being developed.

The executive order is founded on incorrect assumptions 5 about how other countries would respond and how the quality and cost of prescription drugs in America would change. 

Because the executive order includes drugs covered under Medicare Part B and Part D, it is similar to the international pricing index that the Trump administration floated using in 2018 6 and also similar to the international reference pricing proposal in the drug pricing package 7 that House Democrats passed in December 2019.

None of the pricing proposals show how they would directly reduce out-of-pocket costs for prescription drugs. An Avalere study 8 found that fewer than 1% of Medicare Part B consumers would see a reduction in out-of-pocket costs with the international pricing index model.

Concerns about MFN Pricing 

+ The MFN executive order amounts to importing European-style price controls, which have led to deadly shortages and lapses in patient care. Nearly 90 percent of drugs launched worldwide in the last eight years are available in the United States. In contrast, fewer than half are available next door in Canada. 9

+ U.S. medical innovation relies on market pricing and intellectual property protection. The MFN executive order is the opposite of free trade. It will introduce socialist price controls and trample on intellectual property rights. Indeed, the administration’s scheme ultimately will quash innovation and put in danger the very patients it seeks to help.

Fast Facts on Drug Research & Development

Screen+Shot+2020-10-08+at+10.55.11+AM.png

How to Talk About the Most Favored Nation Executive Order

President Trump’s “Most Favored Nations” Executive Order represents bad public policy and poor negotiation: It negates intellectual property protections, just like bad trade agreements do, and it abdicates all responsibility for market negotiation in favor of adopting the vagaries of foreign countries’ socialist economic and pricing policies. It ignores patient safety and provides a false promise of lower prescription drug prices. 

Citations

  1. “A Tough Road: Cost To Develop One New Drug Is $2.6 Billion; Approval Rate for Drugs Entering Clinical Development Is Less Than 12%.” Policy & Medicine, https://www.policymed.com/2014/12/atough-road-cost-to-develop-one-new-drug-is-26-billion-approval-rate-for-drugs-entering-clinical-de.html.

  2. Policy & Medicine, https://www.policymed.com/2014/12/a-tough-road-cost-to-develop-one-new-drug-is-26-billion-approval-rate-for-drugs-entering-clinical-de.html.

  3. Administration Outlines Plan To Lower Pharmaceutical Prices In Medicare Part B | Health Affairs. https://www.healthaffairs.org/do/10.1377/hblog20181026.360332/full/.

  4. Administration Outlines Plan To Lower Pharmaceutical Prices In Medicare Part B | Health Affairs. https://www.healthaffairs.org/do/10.1377/hblog20181026.360332/full/.

  5. Affairs (ASPA), Assistant Secretary for Public. “HHS Advances Payment Model to Lower Drug Costs for Patients.” HHS.Gov, 25 Oct. 2018, doi:10/25/hhs-advances-payment-model-to-lower-drug-costsfor-patients.html.

  6. “Canada to U.S.: ‘Don’t Take Our Cheap Drugs!’” Informed American, 18 July 2019, https://www.informedamerican.com/exclusive-canada-warns-u-s/.

  7. CEA-Rx-White-Paper-Final2.Pdf. https://www.whitehouse.gov/wp-content/uploads/2017/11/CEA-Rx-White-Paper-Final2.pdf.

  8. CPhADrugShortagesandRecallsSurvey2018.Pdf. https://www.pharmacists.ca/cpha-ca/assets/File/cpha-on-the-issues/CPhADrugShortagesandRecallsSurvey2018.pdf.

  9. Martell, Allison. “Canadian Ambassador Says Drug Imports Would Not Lower U.S. Prices.” Reuters, 1 Nov. 2019. www.reuters.com, https://www.reuters.com/article/us-canada-health-suppliesidUSKBN1XB55E.

  10. “‘Most Favored Nation’ Reference Pricing for Drugs: A Scam for Seniors.” STAT, 16 Sept. 2020, https://www.statnews.com/2020/09/16/most-favored-nation-reference-pricing-executive-order-scam-forseniors/.

  11. “Trump Administration Plans To Allow Imports Of Some Prescription Drugs From Canada.” NPR.Org, https://www.npr.org/2019/07/31/746905508/trump-administration-plans-to-let-prescription-drugsbe-imported-to-u-s.

  12. “With Election Looming, Trump Releases Major, Last-Ditch Drug Pricing Order.” STAT, 13 Sept. 2020, https://www.statnews.com/2020/09/13/drug-pricing-executive-orders/.

Ainsley Shea